Correlation Between Merck and UNITED
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By analyzing existing cross correlation between Merck Company and UNITED TECHNOLOGIES P, you can compare the effects of market volatilities on Merck and UNITED and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Merck with a short position of UNITED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and UNITED.
Diversification Opportunities for Merck and UNITED
Very weak diversification
The 3 months correlation between Merck and UNITED is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and UNITED TECHNOLOGIES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED TECHNOLOGIES and Merck is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Merck Company are associated (or correlated) with UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED TECHNOLOGIES has no effect on the direction of Merck i.e., Merck and UNITED go up and down completely randomly.
Pair Corralation between Merck and UNITED
Considering the 90-day investment horizon Merck Company is expected to under-perform the UNITED. In addition to that, Merck is 1.5 times more volatile than UNITED TECHNOLOGIES P. It trades about -0.16 of its total potential returns per unit of risk. UNITED TECHNOLOGIES P is currently generating about 0.04 per unit of volatility. If you would invest 9,090 in UNITED TECHNOLOGIES P on September 2, 2024 and sell it today you would earn a total of 165.00 from holding UNITED TECHNOLOGIES P or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.88% |
| Values | Daily Returns |
Merck Company vs. UNITED TECHNOLOGIES P
Performance |
| Timeline |
| Merck Company |
| UNITED TECHNOLOGIES |
Merck and UNITED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and UNITED
The main advantage of trading using opposite Merck and UNITED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, UNITED can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UNITED will offset losses from the drop in UNITED's long position.The idea behind Merck Company and UNITED TECHNOLOGIES P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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